[A-List] China: rise of the new class

["Michael Keaney" <michael.keaney@xxxxxx>]

Confucius says: 'Create jobs and be rich'

Entrepreneurs are a key part of China's economic landscape

John Gittings in Hangzhou
Tuesday November 5, 2002
The Guardian

Huang Qiuling, a former farmer who is now one of the 50 richest
entrepreneurs in China, quotes Confucius in support of his leisure empire in
the ancient capital of Hangzhou. The Master apparently said that he
preferred to enjoy beautiful scenery and sing songs than to become a
government official.

Mr Huang, whose mission is to bring entertainment to the masses, has
published a thesis on the new "leisure age". His Song Dynasty theme park in
Hangzhou offers an eclectic mix of ages and cultures. Here families can
dress up in imperial costume, sit in a buffalo cart, watch Chinese opera -
or visit a full-size replica of the White House.

Mr Huang has his office in the Blue Room. From the front door there is a
view of the Washington Monument, from the back a scaled-down Mount Rushmore.

Forbes magazine has just published its latest list of China's extremely
rich, and he is rated No 44, with assets worth $150m. An ex-soldier, he made
his start on Hainan island in the late 1980s when it was the wild frontier
of emerging Chinese capitalism.

A recent story in Time Magazine, poking fun at Mr Huang's "ersatz castle",
has infuriated him. He has issued an earnest rebuttal, titled Do Not
Demonise China's Entrepreneurs.

Indeed, Mr Huang and his fellow entrepreneurs are generally now a very good
thing in China: the 16th Communist party congress which begins in Beijing
this week is expected to endorse formally President Jiang Zemin's proposal
that they should be allowed to join the party. In reality, perhaps one in
four of them, including quite a few millionaires, already belong.

Private Chinese companies accounted for nearly one-quarter of industrial
output in 1999. With the added share of foreign companies (mostly financed
from Taiwan or Hong Kong) the total reached nearly 40%.

There are now nearly as many private companies, large and small, as
state-owned enterprises, which decreased by 10% in the 1990s, shedding
hundreds of thousands of workers in the process.

Shanghai, China's wealthiest city, expects its private sector to grow by
another 40% in the first half of this decade.

During the last years of Mao Zedong, even small peddlars selling candied
fruit or clothes pegs were accused of being "remnants of capitalism".
Official policy then made a 180-degree turn on the initiative of the late
paramount leader Deng Xiaoping.

He said that China was at the "primary stage of socialism" with economic
development as the top priority for the next century.

Mr Jiang has taken this a stage further. The party should represent the
"advanced productive forces", he argues in a doctrine which the congress
will endorse. What could be more productive than an enthusiastic
entrepreneur like Mr Huang?

Yet "successful entrepreneurs keep their heads down", Forbes magazine
cautions. After last year's "richest list" was published, premier Zhu Rongji
sent in the tax inspectors: numbers two and three on the list are now under
investigation.

In the most dramatic case, north-east China's flower king, Yang Bin, was
detained in October, only days after being appointed to run a new special
economic zone in North Korea. Mr Yang also has a theme park - his
headquarters are based in a replica of Amsterdam railway station.

As capitalism matures in China it is becoming less flamboyant.
Western-trained economists and business managers are taking charge of the
rapidly growing hi-tech and consumer industries, with pan-Asian standards of
reliability and service. At the grassroots, millions of small-scale
entrepreneurs jostle for space, running cheap restaurants, fixing
motorbikes, turning out cheap plastic parts, operating taxis or
motor-scooters, filling any space available in the informal sector.

China relies increasingly on the private sector to cope with the
consequences of urban joblessness - officially 3.5%, but admitted to be at
least twice as high. In Shanghai, private business has provided jobs for
more than 600,000 workers laid off by state companies.

In Hangzhou, although the provincial capital of the affluent coastal
province of Zhejiang, and one of China's top tourist destinations, there
were 177,000 registered jobless workers last year out of a total city
population of two million, according to a survey by the Academy of Social
Sciences. More than 40% had been unemployed for more than a year, and
three-quarters had no special skills.

A majority of them have now found work in the informal sector, although on
low wages and usually without a contract, the survey reports.

Creating real jobs for a labour market already under pressure from a rising
population will be China's biggest challenge in the years ahead. A wave of
industrial protests this year in the old industrial rust-belt of the
north-east has caused evident alarm and the government is doing more to
provide minimum welfare for the urban poor (the rural poor must rely on
their families or become migrant workers). It is pumping more money into
infrastructural development projects in an effort to generate jobs. Yet the
overall rate of job increases is declining.

The World Bank has calculated that China needs eight million new jobs every
year - the real figure may be twice as much. Mr Jiang's and his successors
know that this is their toughest task ahead. They will be relying even more
on Mr Huang and his fellow entrepreneurs.

Rich and poor

Population 1.28 billion

Per capita income Rural £187 per annum; urban £543

50 richest are worth more than £100m each; 10 wealthiest £375m each (Forbes)

Workforce Private enterprises employ 46% of urban labour force; 54% work for
state or collective enterprises

Migrants Rural migrant workers total 100-150 million (estimate)

UnemploymentUrban 14 million; rural 120 million (both estimates)

Social security recipients 12.3 million